Telcos seek uniform GST rate across India, cap at 15 per cent

A higher GST rate, they said, would drive up cost of provisioning services, and in turn, hurt both prepaid and postpaid consumers by way of higher phone bills.Kalyan Parbat | ET Bureau | August 01, 2016, 08:14 IST

KOLKATA: India's top telcos have urged the government to resolve a bunch of sticky issues before implementing the goods & services tax (GST) regime, calling for uniform rate across states/union territories (UTs), with a cap of 15%.

A higher GST rate, they said, would drive up cost of provisioning services, and in turn, hurt both prepaid and postpaid consumers by way of higher phone bills.

The call for a uniform tax rate for telecom services under the proposed GST regime stems from the fact that circle boundaries are not in sync with geographical borders of states/UTs in several cases. Failure to do so, they said, could lead to tax complications in some big markets with the prospect of differential levies within the same circle, resulting in pricing discrepancies, non-compliance, customer complaints and business disruption.

"We've recently told the finance ministry that it is imperative to have a uniform tax rate for telecom services across states/UTs, and a failure to do so could lead to a surge in consumer complaints as differential tax rates would impact the talktime pricing within a circle," Rajan Mathews, director general, Cellular Operators Association of India (COAI) told ET. COAI, he said, is working with E&Y India to identify potential irritants in GST regime for telecom.

Telecom companies have justified their call for capping GST rate at 15% on grounds that their services currently attract 15% service tax — being an infrastructure service designated as an essential service under the Essential Services Maintenance Act, 1968 — and are availed of by the masses. "Any further increase in rate of tax in the GST era would have a direct impact on increase in costs for subscribers and would be crippling for the telecom industry as well," said the COAI director general.

"For instance, the Delhi circle includes Gurgaon and Noida which are geographically a part of Haryana and Uttar Pradesh respectively. So, if tax rates in the GST regime are not uniform across states/UTs, a prepaid user's talktime within Delhi circle could vary, depending on his actual location," said a senior executive of one of India's biggest mobile carriers.

Similar talktime voucher pricing challenges could creep up in the Northeast circle, which comprises Tripura, Nagaland, Arunachal, Pradesh, Meghalaya, Manipur or Mizoram. Likewise, Maharashtra circle includes Goa, but the two are separate states. Ditto with Madhya Pradesh and Bihar circles, which include Chattisgarh and Jharkhand respectively, but are separate states geographically.

Telecom companies have also urged the finance ministry to allow them the benefit of a single pan-India registration for tax compliance in the GST regime, primarily for the sake of administrative convenience, especially since statewise registrations would be impossible to comply with for pan-India telecom operators.

"The model GST law envisages that every telecom service provider obtain separate registration in each state/UT for tax compliance. This would be infeasible and result in humongous increase in the compliance effort for pan-India operators and complicate matters.

It could lead to multiple assessments and audits, leading to a potential credit blockages and business uncertainty," said Mathews.

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